Effects of Nationality on Global Strategy

Article excerpt

Does corporate nationality affect the use of global strategy? Since most definitions of global strategy (e.g., Porter 1986, Bartlett/Ghoshal 1989) involve integration of policies, operations, and personnel across nations, the nationality of the company concerned should a priori have some effect. But nationality is a multidimensional phenomenon (including citizenship, history, culture and experience) and can apply to different aspects of an MNC (including the past and current location of corporate headquarters, the nationality of managers, and the national location of units and subsidiaries). The formulation of global strategy lies primarily in the domain of business or corporate headquarters, and even its implementation is usually driven by headquarters. Indeed, overseas subsidiaries tend to resist global strategy because of its attendant loss of autonomy. So in this study, we focus on the effects of the nationality of the parent company. Parent nationality can differ from the nationality of the business unit (e.g., French Thomson now owns American RCA) and from that of senior managers (e.g., a Cuban as the CEO of Coca-Cola or a German, and then a Frenchman, as the CEO of Apple Computer), but these are exceptions, albeit increasing, and a fruitful topic for another study. Another exception is that the company may be registered in one country, but have its senior management located in another. For example, Jardine Matheson moved its registration to Bermuda, but most of its head office personnel continue to operate out of Hong Kong. For the vast majority of MNCs, the original and current countries of corporate headquarters and of most business headquarters are still the same. So we define nationality as the country in which most HQ managers of the parent company are located.

Parent nationality can affect global strategy in a number of ways. First, national history has affected the general order of entry into international markets: Western European first, Americans second, Japanese third, and other Asian countries and some Latin American ones going international most recently. Early entry clearly leads to greater global dominance, it being well established that order of entry is one of the primary determinants of share. The timing of entry should also affect global strategy. In particular, the standardization and specialization in global strategy requires lower trade barriers and differences in national customer tastes. More recent international entrants, like Japanese companies in the post-WWII period, have faced increasingly lower trade and taste barriers.

Second, parent nationality affects what types of organization structures, management processes, personnel practices and managerial culture predominate. Some of these differences may arise from the accidents of development and others may be rooted in national culture or be a combination of the two.

Existing Evidence on Role of Nationality

Many studies in international business have found nationality effects and some have found no effects. But in most cases, these studies have not been concerned with global strategy, as we define it in terms of the extent of uniformity and integration across countires. These earlier studies have examined within-country strategies and organizational approaches. For example, Douglas and Craig (1983) found no important differences, using PIMS data, in explaining the performance of US and European national businesses within individual countries. The few studies looking at global strategy have found national differences, and we cite them in the next few paragraphs.

Some overall characterizations of possible national differences in globalization can be made, particularly for the three regions that have dominated global business - Western Europe, the Unites States and Japan. In their response to globalization forces, MNCs in these three regions are likely to be affected by their history of internationalization, to some extent following Stopford and Wells' (1972) stages of international development. …